Descriptions

This Thesis explores the possibility of increased export and
export earnings stability for Costa Rica after the implementation of
the Caribbean Basin Economic Recovery Act (CBERA) or Caribbean Basin
Initiative (CBI). It was expected that this policy would not only
increase trade and exports for some developing nations in the
Caribbean but also promote development and economic stability.
An export earnings model was calculated using the deflated
export earnings to the U.S. and fitting a time trend equation by OLS
to calculate the residuals. These residuals were then transformed to
develop a risk or instability equation which included independent
variables such as the export concentration index to reflect
diversification of exports, the ratios of food, manufactures and raw
materials in exports and the share of total Costa Rican exports
deriving from the U.S. market.
A reduced risk equation was estimated using OLS. The relative
effect of the policy, measured by a dummy variable for the period
1983-1987 was estimated for each of the independent variables.
The results indicate that there has been a distinct effect of
the policy variable upon the diversification, manufactures, raw
materials and food products exported by Costa Rica to the U.S. The
increase in manufactured exports is significant, at the same time,
there have been decreases in the value of traditional agricultural
exports such as coffee, sugar, bananas and beef. Vegetables' and
fruits' share of Costa Rican exports to the U.S. has increased
noticeably.
Although total export earnings for Costa Rica show negative
growth during the period 1981-1983, U.S. export earnings have been
consistently increasing.
Export earnings from the U.S. show a significant increase as
detected by the share of Costa Rican total exports earnings
originating in the U.S. In 1980 less than 40% of Costa Rican export
earnings came from the U.S. while in 1987 the figure is just over
60%, indicating increased dependency on this market as a source of
export earnings.
Export earnings instability, as measured in this research,
shows statistically significant reductions after 1983 leading the
author to conclude that this policy is possibly increasing trade and
reducing the long term instability of Costa Rican exports to the
U.S., therefore having some effect on the stability of long term
development, and possibly, causing changes in the country's
capability to deal with its debt and development efforts.
The components of instability or risk of export earnings from
the U.S. market yielded interesting insight into possible causes of
these variations. Statistically significant negative signs were
detected for the ratio of foods in exports and the dummy variable,
indicating that reducing the share of foods in exports in this market
would cause increases in risk and that the policy variable has had
the consequence of reducing risk. The ratio of raw materials in
exports was, as expected, of limited statistical significance
although it consistency exhibited a negative sign indicating similar
effects as the food exports. The manufacture ratio in exports was
detected to be in general statistically significant during the trial
estimations however, lacking consistency. The export concentration
index was not determined to be statistically significant in causing
export earnings instability in this particular case, however as with
all independent variables tested, it was significantly changed after
1983.
These results tend to support the original intention of the
CBERA for the case of Costa Rica. Increases in exports and export
earnings stability appear to have ocurred. However, the research
suggest some caution in relying heavily in the U.S. market as a
source of export earnings and supports the view that traditional
exports bring about more stability than manufactures and raw material
exports.